I heard back from my brokers about that; SOMETHING that is haunting my investigation of the 36 unit apartment complex. Well, there are two major SOMETHINGS that are depressing the price of the property. The first one is the most major too.
ASBESTOS. Yup, big and scary. The building was built in 1906 and has that scary substance in it. This means a few things. Conventional lending is not going to happen. I need to find alternative funding to acquire the property, it also means, most retail buyers are going to be out of the question, and are going to be scared away from the work and risk involved in the deal. Both create an opportunity for a value add investor who understands that the risk means opportunity and opportunity means value.
RESPONSE: Upon further investigation we discovered that the asbestos is limited to an old de-commissioned boiler. And the heating system that was being used. The cost of the SOMETHING has gone down, and it’ll just be a portion of the removal costs.
UNHAPPY PARTNERSHIP. This is a huge problem and a huge opportunity. The listing broker has states that the owners are tough to communicate with and that they don’t like working with each other anymore. Patience is going to be a virtue and an opportunity here. If the partnership is acrimonious then and one party is trying to sell or one is trying to keep it, there can be a chance to craft a solution for the problem. This is something I am familiar with as I worked on the Mission Property. That’s a deal that never came to fruition, but it seems to be a common theme in properties that need to be sold at a discount. One of the things we as investors are here for is to provide win/win/win situations. Helping someone out of an acrimonious situation that is destroying friendships or families is just one of the win scenarios that we can benefit from.
RESPONSE: After talking to the listing broker the story is kind of sad, and disheartening. It is also an argument against investing with family. Here is the scenario: A Local Developer had some properties and put a couple into a trust to help his extended family out. With the profits of the property being distributed to the trustee’s of the family. According to the listing agent there was legal kerfuffle. Interest in the trust was divided up among the trustee’s. When the developer passed away his kids managed the property but the other trustee’s decided that they were being charged too much for the management of the property. Our potential property fell into disrepair and mismanagement and went from a cash-flow property to the diamond in the rough.